Correlation Between Data Communications and Apple

Can any of the company-specific risk be diversified away by investing in both Data Communications and Apple at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Data Communications and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Data Communications Management and Apple Inc CDR, you can compare the effects of market volatilities on Data Communications and Apple and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Data Communications with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data Communications and Apple.

Diversification Opportunities for Data Communications and Apple

-0.5

Correlation Coefficient

Data Communications  Apple

Very good diversification

The 3 months correlation between Data and Apple is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Data Communications Management and Apple Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc CDR and Data Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Data Communications Management are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc CDR has no effect on the direction of Data Communications i.e., Data Communications and Apple go up and down completely randomly.

Pair Corralation between Data Communications and Apple

Assuming the 90 days trading horizon Data Communications Management is expected to generate 7.89 times more return on investment than Apple. However, Data Communications is 7.89 times more volatile than Apple Inc CDR. It trades about 0.2 of its potential returns per unit of risk. Apple Inc CDR is currently generating about 0.71 per unit of risk. If you would invest  185.00  in Data Communications Management on September 17, 2024 and sell it today you would earn a total of  33.00  from holding Data Communications Management or generate 17.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Data Communications Management  vs.  Apple Inc CDR

Data Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data Communications Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Apple Inc CDR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Data Communications and Apple

The main advantage of trading using opposite Data Communications and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Communications position performs unexpectedly, Apple can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Apple will offset losses from the drop in Apple's long position.

The idea behind Data Communications Management and Apple Inc CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.